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Servicetax clarification

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cherry joseph

Others

22 Points Posted on 07 March 2014

Sir,

we had quoted for a rewinding job with M/s.FACT LTD (Public sector undertaking) . They had asked in the tender to quote rates inclusive of all taxes and duties. Hence we quoted a rate and we specifically mention that the rates include only vat tax and service providers liability towards service tax , which is (Base amt X 70% X 12.36%)1/2

which is same as Base Amt. X 4.326% . We specifically mentioned in the quotation that service receivers liability towards service tax not included in the rate quoted and will be your responsibility. However when the work order was issued it was specifically mention that the rate includes vat tax and 8.652% service tax. From this we understood that the rate of service tax mentioned had both service providers liability and service receivers liability. We objected and sent a letter, but the company informed that virtue of reverse charge mechanism, we will have to bare service receivers liability also. Kindly advise.

Replies (1)

Manoj Agarwal

Service Tax Consultant Rourkela Service

2755 Points Posted on 07 March 2014

Your service falls under the 'Works Contract' Service u/s 65B(54) and assuming that the service provider is an individual, or proprietorship firm or partnership firm, due to reverse charge, 50% of the tax liability is to be discharged by the body corporate service recipient. But, apart from this, the service receiver can shift the burden to pay service tax on the service receiver. If the contract between parties so provide, the service receiver may deduct service tax from the payment due to the service provider.

However, as you mentioned that in your quotation, you specifically mentioned that the rate is exclusive of service tax liability of service receiver, the company is wrong in shifting its liability on you. The company should bear themself the 50% liablity of service tax under RCM.